Market Update Tsys have steadied after Wednesday`s late slide, and ahead of the FOMC decision later today. The 10-Yr T-Note future is off 4.5/32 at 117-27, still trading within a tight range (117-25 low, 117-30 high). Cash curve is bull flattening, with short-end relatively unchanged. The 2-Yr yield is down 0.4bps at 2.9527%, 5-Yr is down 0.2bps at 3.0779%, 10-Yr is down 1.1bps at 3.2244%, and 30-Yr is down 1.3bps at 3.4286%. This comes against a backdrop of weaker equity futures (S&P Emini off 0.5%) and stronger dollar (DXY up 0.3%). No change expected at today’s FOMC decision, but dovish risks from the statement
News headlines
Bombardier Plans to Cut 5,000 Jobs, Sell Turboprop Aircraft Unit (Bloomberg) Bombardier Inc. plans to cut about 5,000 jobs while selling its turboprop unit and a training business as Chief Executive Officer Alain Bellemare extends a far-reaching turnaround drive at Canada’s biggest aerospace company. Net proceeds from the asset sales will be about $900 million, Bombardier said in a statement Thursday. The employment reduction, Bellemare’s third since taking the reins at the debt-laden company in 2015, will yield annual savings of about $250 million by 2021 while also prompting a charge of a comparable amount next year.
American Voters Just Sent a Surprising Message About the Trade War (Bloomberg) The trade war of 2018 was, in theory, supposed to hurt Republicans in states vulnerable to higher tariffs and Chinese retaliation. The results from Tuesday’s midterm elections suggest that didn’t really happen. President Donald Trump’s tariffs were a hot topic in farming regions and the Rust Belt — places with a lot to lose in the dispute with China, which countered with duties on iconic American exports from soybeans to lobsters. Yet several candidates who opposed Trump’s tariffs were defeated, while some who backed the duties won their races.
U.S. Mortgage Applications Hit Lowest Since 2014 as Rates Rise (Bloomberg) A gauge of U.S. mortgage applications fell last week to the lowest level in almost four years as borrowing costs hit the highest since 2010, adding to challenges for the housing market. The Mortgage Bankers Association’s market composite index fell 4 percent in the week ending Nov. 2 to 316.2, the lowest reading since December 2014, according to a report Wednesday from the Washington-based group. The survey’s contract rate on a 30-year fixed loan rose to 5.15 percent from 5.11 percent, while a gauge of applications to purchase homes dropped 5 percent to the lowest in about two years.
U.S. Stock Futures Slide as Treasuries Advance: Markets Wrap (Bloomberg) U.S. stocks looked set to put an end to a global rally that spread across Europe and Asia after the midterm elections. Benchmark Treasury yields retreated from the highest level since 2011. Futures on the S&P 500 retreated after a surge in the underlying index yesterday. Europe’s main equity gauge pared an earlier advance spurred by strong earnings and dividend outlooks from companies including AstraZeneca Plc and Siemens AG. It remained in the green, however, after an upbeat session in Asia. Japan’s Topix jumped 1.7 percent and shares in Hong Kong and South Korea also posted solid gains. Italian bond yields climbed after the European Union warned the nation’s budget deficit will move dangerously close to the economic bloc’s limit of 3 percent. The dollar edged higher.
Diversified retailer Canadian Tire’s profit rises 16.5 percent (Reuters) Diversified retailer Canadian Tire Corp Ltd (CTCa.TO) reported a 16.5 percent rise in quarterly profit on Thursday, helped by higher sales at its retail segment and the inclusion of newly acquired Helly Hansen’s operations to its earnings. Net income rose to C$231.3 million ($155.54 million), or C$3.15 per share, in the third quarter ended Sept. 30, from C$198.5 million, or C$2.59 per share, a year earlier. Revenue rose to C$3.63 billion from C$3.27 billion.
Car parts maker Magna tops profit estimates, lowers 2018 outlook (Reuters) Canadian auto parts maker Magna International Inc (MG.TO) topped estimates for quarterly profit on Thursday while trimming its 2018 total sales forecast on the back of a dip in its units that produce car frames and complete vehicles. The Aurora, Ontario-based company now expects light vehicle production – its main measure for output of a diverse range of parts and assembly work – to reach 17 million units in North America, down from a previous forecast of 17.2 million. The company also said it expects costs in its unit handling auto exteriors and structures to go up and total sales in fiscal 2018 to be between $40.3 and $41.4 billion compared to an earlier range of $40.3 to $42.5 billion.
Imperial CEO says $2.6B Aspen project needed amid crude price slump (BNN) Imperial Oil Ltd. has approved a final investment decision to proceed with its $2.6-billion Aspen oil sands project in Alberta. Construction will begin in the fourth quarter of this year. Imperial says Aspen will eventually produce 75,000 barrels of bitumen per day, with first output anticipated in 2022.
Cannabis stocks spike after U.S. Attorney General Sessions resigns (BNN) Cannabis stocks, already bolstered by wins in the midterm elections, got an added boost when anti-pot Attorney General Jeff Sessions announced his resignation Wednesday afternoon. Exchange-traded funds that track marijuana stocks, including the Horizons Marijuana Life Sciences Index ETF in Toronto and the U.S.-listed ETFMG Alternative Harvest ETF, jumped to fresh highs on the news, gaining as much as 9.1 per cent and 7.9 per cent, respectively.
Overnight markets
Overview: US 10yr note futures are down -0.066% at 117-29, S&P 500 futures are down -0.32% at 2807.5, Crude oil futures are down -0.02% at $61.66, Gold futures are down -0.2% at $1226.3, DXY is up 0.25% at 96.239, CAD/USD is down -0.07% at 0.7631.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.351% | 2 Year | 2.953% |
| 5 Year | 2.447% | 5 Year | 3.073% |
| 10 Year | 2.525% | 10 Year | 3.217% |
| 30 Year | 2.548% | 30 Year | 3.419% |
US Economic Data
| 8:30 AM | Initial Jobless Claims, Nov 3rd est 213k (214k prior) |
| Continuing Claims, Oct 27th est 1634k (1631k prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Nov 4th (60.3 prior) |
| 14:00 AM | FOMC Rate Decision (Upper Bound), Nov 8th est 2.25% (2.25% prior) |
| FOMC Rate Decision (Lower Bound), Nov 8th est 2.00% (2.00% prior) | |
| Interest Rate on Excess Reserves, Nov 9th est 2.20% (2.20% prior) |
Canadian Economic Data
| 8:15 AM | Housing Starts, Oct est 198.0k (188.7k prior) |
| 8:30 AM | New Housing Price Index MoM, est 0.0% (0.0% prior) |
| New Housing Price Index YoY, est 0.2% (0.4% prior) |
Disclosure and Disclaimer
The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.
Ivan Greenstein, Stephan Buu, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230